DEFENSE LOGISTICS

Army Should Track 

Financial Benefits 

Realized from its 

Logistics 

Modernization 

Program

Report to Congressional Requesters

November 2013

GAO-14-51

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-51, a report to 

congressional requesters

November 2013

DEFENSE LOGISTICS

Army Should Track Financial Benefits Realized from 

its Logistics Modernization Program

Why GAO Did This Study

LMP is an Army enterprise resource 

planning system that supports 

industrial operations conducted by 

AMC at its life cycle management 

commands and its maintenance, 

manufacturing, and storage sites. 

Increment 1 of LMP was fully deployed 

in October 2010, and the Army has 

spent approximately $1.4 billion on 

LMP through fiscal year 2012. In order

to expand the system’s capabilities, the 

Army plans to deploy a second 

increment of LMP. The life cycle cost 

for LMP Increment 1 and Increment 2, 

from fiscal year 2000 through 2026, is 

estimated to be over $4 billion. GAO 

was asked to evaluate AMC’s use of 

LMP. This report assesses the extent 

to which (1) LMP supports AMC’s 

industrial operations and (2) the Army 

has realized the expected benefits 

from deploying LMP. GAO reviewed 

Army documents regarding LMP usage

and interviewed officials from AMC 

headquarters, the LMP product office, 

and 14 AMC sites that use LMP to 

conduct their operations.

What GAO Recommends

To enable the Army to determine 

whether the expected financial benefits

of LMP are being achieved, GAO 

recommends that the Army develop 

and implement a process to track the 

extent of financial benefits realized 

from the use of LMP during the 

remaining course of its life cycle. This 

process should be linked with the LMP 

performance baseline now being 

developed by the Army for use at AMC 

industrial sites. The Army concurred 

with GAO’s recommendation.

What GAO Found

The Army Materiel Command (AMC) is using the Logistics Modernization 

Program (LMP) Increment 1 to support its industrial operations, but additional 

development is necessary, according to the Army, because the current system 

does not support certain critical requirements, including enabling the Army to 

generate auditable financial statements by fiscal year 2017. Officials at the 14 

AMC sites GAO visited stated that LMP provided the core functionality they 

needed to support their operations and that they are improving in their ability to 

use the system. Additionally, some sites have locally developed tools to augment 

LMP capabilities. Army officials stated that although LMP is functional, it currently

does not support certain critical requirements that have emerged since its initial 

development, such as automatically tracking repair and manufacturing operations 

on the shop floor of depots and arsenals. In addition, according to Army officials, 

the current system will not enable the Army to generate auditable financial 

statements by 2017, the statutory deadline for this goal. Increment 2, which is 

estimated to cost $730 million through fiscal year 2026, is expected to address 

these shortcomings. The Army is in the process of developing Increment 2 and 

expects to complete fielding by September 2016.

The use of LMP Increment 1 has provided the Army some benefits, but whether 

the system has delivered the expected financial benefits to date is unknown 

because AMC does not have a process for tracking financial benefits realized. 

Since its deployment, LMP has provided some benefits to the Army. For 

example, because LMP relies on accurate data to perform effectively and 

efficiently, the Army has made data accuracy a priority and improved the 

accuracy of its data by conducting data assessments, correcting data problems, 

and placing management emphasis on data accuracy. Additionally, the use of 

LMP has improved accountability for inventory stored at AMC depots, increased 

visibility over Army assets, and resulted in other efficiencies—such as providing 

faster access to information. AMC officials also stated that LMP has enabled 

them to develop and begin to implement a set of standardized, enterprise-wide 

performance measures to better assess the business operations of AMC sites. 

The officials stated that these performance measures, which were being used 

during AMC leadership reviews in June 2013, were necessary because the 

measures previously used to assess AMC performance were inadequate. 

However, the extent to which financial benefits have been realized from 

deploying LMP is unknown. The Army expected LMP to lead to over $750 million 

in financial benefits by fiscal year 2012 and eventually achieve more than two 

dollars in benefits for every dollar spent. Army officials told us that there currently 

is no accurate process in place to track financial benefits associated with LMP.

Officials stated that the inability to quantify benefits from LMP-driven 

performance improvements was due in part to the fluctuations in AMC workload 

resulting from operations in Iraq and Afghanistan. The Army is in the process of 

developing a performance baseline for sites that will pilot Increment 2, and it 

intends to apply these metrics to other AMC sites before May 2015. Federal 

guidelines and standards outline the need for assessing whether the benefits

expected from an investment are achieved. Without a process in place to track 

the financial benefits associated with LMP, the Army does not have a way to 

determine whether LMP’s projected financial benefits are materializing.

View GAO-14-51. For more information, 

contact Zina Merritt at (202) 512-5257 or 

merrittz@gao.gov. 
Page i GAO-14-51 Defense Logistics

Letter 1 

Background 3

LMP Supports AMC’s Industrial Operations, but Additional 

Development Is Needed to Meet Certain Critical Requirements 6

LMP Has Provided Some Benefits to the Army, but the Extent of 

Financial Benefits to Date Is Unknown 15

Conclusions 22

Recommendation for Executive Action 22

Agency Comments and Our Evaluation 23

Appendix I Scope and Methodology 24

Appendix II Comments from the Department of the Army 26

Appendix III GAO Contact and Staff Acknowledgments 28

Related GAO Products 29

Tables 

Table 1: Estimated Total Life Cycle Costs of LMP Increments 1 and 

2, Fiscal Year 2000–2026 6

Table 2: LMP Increment 2 Components and Deployment Timeline 11

Table 3: Projected Financial Benefits from LMP Increment 2 14

Figure

Figure 1: LMP Development and Deployment Timeline 5

Contents 
Page ii GAO-14-51 Defense Logistics

Abbreviations

AMC Army Materiel Command

LMP Logistics Modernization Program

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Page 1 GAO-14-51 Defense Logistics

441 G St. N.W.

Washington, DC 20548

November 13, 2013

The Honorable Robert Wittman

Chairman

The Honorable Madeleine Z. Bordallo

Ranking Member

Subcommittee on Readiness

Committee on Armed Services

House of Representatives

The Honorable J. Randy Forbes

House of Representatives

The Army’s Logistics Modernization Program (LMP) is among a new 

generation of enterprise resource planning systems1 that are replacing 

older legacy systems in the Department of Defense (DOD). The Army 

initiated LMP in 1999 and completed final deployment of Increment 1 of 

the system in 2010. LMP is deployed at about 50 industrial operations 

sites within Army Materiel Command (AMC), including its life cycle 

management commands, maintenance depots, arsenals, and ammunition 

manufacturing and storage sites and has over 20,000 users. As of fiscal 

year 2012, the Army had spent $1.4 billion on LMP. The Army projected 

that LMP would provide over $750 million in financial benefits by fiscal 

year 2012 through, for example, reducing inventory and legacy system 

costs.2

 

1

An enterprise resource planning system is an automated information system using 

commercial off-the-shelf software and consisting of multiple, integrated functional modules 

that perform a variety of business-related tasks such as accounting; inventory forecasting, 

purchasing, management, and distribution; and scheduling work.

2

This projection is from an Army study prepared by the LMP program office and reviewed 

by the Deputy Assistant Secretary of the Army for Cost and Economics to support the 

fiscal year 2010 Investment Review Board certification of LMP. Investment Review Board 

Certification is required for certain information technology programs with investment costs 

of $1 million or more. The certification package includes a section on the economic 

viability of the investment, to include the benefit-to-cost ratio and the return on investment. 

 
 

Page 2 GAO-14-51 Defense Logistics

We have conducted several prior reviews that identified weaknesses in 

the Army’s planning and deployment of LMP.3 In our most recent review, 

in November 2010, we reported that it was unclear whether the system 

would provide sites with all the software functionality they needed to 

conduct their operations, whether data maintained in the system were 

sufficiently accurate, and whether the Army would achieve all the 

expected benefits from its investment in the system.4 Given the longstanding challenges associated with the Army’s deployment of LMP, we 

recommended that the Army provide periodic reports to Congress on the 

progress of LMP deployment, the costs of addressing missing LMP 

functionality, and the benefits gained from using LMP. Although DOD 

concurred with our recommendation, it has not yet provided any such 

reports to Congress.

In response to your request that we evaluate AMC’s use of LMP, this 

report assesses the extent to which (1) LMP supports AMC’s industrial 

operations and (2) the Army has realized the expected benefits from 

deploying LMP.

To assess the extent to which LMP supports AMC’s industrial operations, 

we met with and obtained information from Army officials who are 

responsible for implementing and overseeing LMP. We reviewed status 

reports that had been submitted to AMC headquarters by subordinate 

commands and individual sites. We visited 14 AMC sites where the 

system is deployed, including all five Army life cycle management 

commands, all five Army depots, one Army arsenal, and three 

ammunition sites. We also reviewed our prior work related to the 

deployment of LMP and followed up on issues that we had previously 

identified. We obtained information from AMC and the LMP product office 

on the Army’s future plans for LMP and reviewed key documents, such as 

the business case and an accompanying economic analysis, that were 

 

3

See Related GAO Products at the end of this report. The Department of Defense 

Inspector General (DODIG) has also performed reviews of LMP to assess whether the 

system properly supports DOD business processes (see DODIG, Logistics Modernization 

Program System Procure-to-Pay Process Did Not Correct Material Weaknesses, DODIG2012-087, May 29, 2012), as well as reviews of the Army’s ability to meet financial 

improvement and audit readiness goals (see DODIG, Enterprise Resource Planning 

Systems Schedule Delays and Weaknesses Increase Risks to DOD’s Auditability Goals, 

DODIG-2012-111, Jul. 13, 2012).

4

GAO, Defense Logistics: Additional Oversight and Reporting for the Army Logistics 

Modernization Program Are Needed, GAO-11-139 (Washington, D.C.: Nov. 18, 2010).
 

Page 3 GAO-14-51 Defense Logistics

developed to support expanded capabilities to the system. To determine 

the extent to which the Army has realized expected benefits from 

deploying LMP, we reviewed pertinent Army documents that outlined the 

expected financial benefits from deploying LMP. We requested 

information from AMC, the LMP product office, and individual AMC sites 

that we visited regarding actual benefits, if any, achieved to date. 

Appendix I provides further information on our scope and methodology.

We conducted this performance audit from August 2012 to November

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

The Army initiated LMP in 1999 to replace two aging materiel 

management systems—the Commodity Command Standard System and 

the Standard Depot System. In replacing these systems, which had been 

used for more than 30 years to manage inventory, depot maintenance, 

and arsenal manufacturing operations, the Army expected LMP to help 

transform its logistics operations. A modified commercial off-the-shelf 

system, LMP was intended to support AMC industrial operations and 

improve business processes and practices in areas such as operations at 

depots and arsenals and inventory management. By providing a single 

source of data and integrated decision-making tools, LMP was expected 

to increase efficiencies in AMC operations—such as buying and 

managing spare and repair parts and conducting depot level 

maintenance. For example, in the area of planning future maintenance 

capacity, the Army expected improvements to AMC budget forecasts and 

adjustments through reduced repair cycle time, better resource allocation, 

increased production throughput, reduced production cost, and more 

accurate production schedules. With LMP’s deployment, the Army 

expected to achieve benefits that included reduced equipment repair 

times, improved inventory forecasting, and cost savings. Additionally, 

LMP is part of the Army’s broader strategy to implement enterprise 

resource planning systems in other areas and, as such, is expected to 

integrate with other Army systems, to include the General Fund 

Background 
 

Page 4 GAO-14-51 Defense Logistics

Enterprise Business System and the Global Combat Support SystemArmy.5

The deployment of LMP Increment 1 across AMC occurred in three 

phases between 2003 and 2010. The first phase of LMP deployment 

occurred at the Communications-Electronics Command and Tobyhanna 

Army Depot in July 2003. LMP was originally expected to be fully 

deployed across AMC by June 2004, but problems experienced during 

the first phase of deployment caused the Army to delay further 

deployment until these problems were resolved. The second phase of 

LMP deployment occurred at the Aviation and Missile Command and 

Corpus Christi and Letterkenny Army Depots in May 2009. The third and 

final deployment phase occurred in October 2010 at depots, arsenals, 

and other sites within the Army Sustainment Command, the Joint 

Munitions and Lethality Command, and the Tank-automotive and 

Armaments Command.

The Army has plans to expand the capabilities of LMP. On December 27, 

2011, the Under Secretary of Defense for Acquisition, Technology and 

Logistics signed an Acquisition Decision Memorandum that categorized 

the deployed components of LMP as Increment 1 and considered all new 

LMP acquisition activities after December 28, 2011, to be Increment 2. 

The memorandum directed the Army, in preparing for the next acquisition 

milestone review of Increment 2, to submit an updated business case 

along with other specified documents. The Army prepared and submitted 

documents in response to the memorandum, including an updated 

business case6 and an accompanying economic analysis,7 for an 

 

5

By the fourth quarter of fiscal year 2017, all three of these enterprise resource planning 

systems are expected to be fully deployed, to share a common set of data, and to be able 

to provide the Army complete visibility over the wholesale and retail levels of supply.

6

U.S. Army Program Executive Officer for Enterprise Information Systems, Army Logistics 

Modernization Program (LMP) Increment 2 Business Case for Milestone B, Aug. 2013. 

The business case was approved by the LMP Product Director and other Army offices, 

including AMC, the Program Executive Officer for Enterprise Information Systems, and the 

Assistant Deputy Chief of Staff, G-4. 

7

U.S. Army Program Executive Officer for Enterprise Information Systems, Army Logistics 

Modernization Program (LMP) Increment 2 Economic Analysis (EA) Aug. 2013. The 

purpose of the economic analysis was to discuss and compare the costs and benefits of 

maintaining the status quo and implementing LMP Increment 2. Similar to the business 

case, the economic analysis was approved by Army offices, including the LMP Product 

Director. 
 

Page 5 GAO-14-51 Defense Logistics

acquisition milestone review that was held on June 25, 2013. As a result 

of this review, the Army received approval for Increment 2 to move into 

the engineering development phase of its acquisition.8 The Army intends 

to deploy Increment 2 in three waves, beginning in December 2013, and 

is planning for the deployment to be completed by September 30, 2016. 

Figure 1 shows a timeline for LMP development and deployment, 

including both Increment 1 and Increment 2.

Figure 1: LMP Development and Deployment Timeline

As of May 2013, the Army had increased its projections for the system’s 

total life cycle costs from $2.6 billion (fiscal years 2000 through 2021) to 

more than $4 billion (fiscal years 2000 through 2026). This estimate 

includes the fielded components of LMP—Increment 1—as well as the 

expansion of LMP capabilities under Increment 2 (see table 1).

 

8

The purpose of engineering development is to demonstrate that the solution is ready for 

limited fielding and testing in an operational environment. See DOD Directive-Type 

Memorandum (DTM) 11-009, Acquisition Policy for Defense Business Systems (DBS). 
 

Page 6 GAO-14-51 Defense Logistics

Table 1: Estimated Total Life Cycle Costs of LMP Increments 1 and 2, Fiscal Year 

2000–2026 

Dollars in millions

Fiscal year Increment 1 Increment 2 Total

2000-2012 1,388.2 17.3 1,405.5

2013 236.6 109.0 345.6

2014 226.8 125.2 352.0

2015 162.0 125.2 287.2

2016 159.6 83.3 242.9

2017-2026 1,155.0 269.7 1,424.7

Total 3,328.2 729.7 4,057.9

Source: GAO summary of Army data.

AMC is using LMP to support its industrial operations, but additional 

development of LMP is necessary, according to the Army, because the 

current system does not support certain critical requirements that have 

emerged since the initial development of LMP and because the current 

system will not enable the Army to generate auditable financial 

statements. Officials at the 14 AMC sites we visited stated that LMP 

provided the core functionality they needed to support their operations. 

They stated that over time they are improving in their ability to use LMP, 

and some sites have locally developed tools to augment its capabilities. 

Army officials stated that although LMP is functional, the current system 

does not support certain critical requirements, such as requirements 

related to automatically tracking repair and manufacturing operations on 

the shop floor of depots and arsenals. In addition, according to Army 

officials, the current system will not enable the Army to generate financial 

statements validated as ready for audit by 2017, the statutory deadline for 

this goal. Increment 2 is intended to address these shortcomings.

AMC is using LMP to support operations at its industrial sites. Officials at 

all 14 of the sites we visited between October 2012 and March 2013 told 

us that LMP provided the core functionality they needed to conduct their 

operations. Specifically, officials from each of the five Army depots stated 

that they were able to perform their maintenance, repair, and overhaul 

responsibilities using LMP; Rock Island Arsenal officials stated that they 

could perform their manufacturing operations using LMP; and officials at 

the Army ammunition sites we visited told us they used LMP to manage 

their inventory. Similarly, officials at the life cycle management commands 

LMP Supports AMC’s 

Industrial Operations, 

but Additional 

Development Is 

Needed to Meet 

Certain Critical 

Requirements 

AMC Is Using LMP to 

Support Its Industrial 

Operations 
 

Page 7 GAO-14-51 Defense Logistics

stated that they were able to carry out their operations, which include the 

management of spare parts inventory. Additionally, periodic status reports 

submitted to AMC headquarters show that industrial sites where LMP has 

been deployed have been able to conduct their repair and manufacturing 

operations. These reports—which include data on the workload planned 

and completed for the current fiscal year—are submitted and discussed 

during regularly-held meetings to provide AMC headquarters with an 

update on the status of operations. Furthermore, the Army’s fiscal year 

2013 and 2014 working capital fund budget documents state that LMP is 

functional at each of AMC’s life cycle management commands.

We reported in November 2010 that the Army Sustainment Command, 

the Joint Munitions and Lethality Command, and arsenals under the 

Tank-automotive and Armaments Command—all of which had been in 

the final deployment phase of LMP in October 2010—required additional 

system functionality to perform their unique operations and that this 

functionality had not yet been delivered.9 We followed up on each of 

these previously reported issues for our current review.

• The Army Sustainment Command needed (1) an interface between 

LMP and the Army War Reserve Deployment System, a separate 

system used to track inventory and transfer accountability of prepositioned stocks to units and (2) software functionality to conduct 

mass uploads—the automated movement of thousands of items of 

inventory between the Army Sustainment Command and the 

warfighter. During our current review, we found that the Army 

Sustainment Command had established an interface between LMP 

and the Army War Reserve Deployment System, and officials stated 

that LMP now has the capability to perform a mass upload.

• The Joint Munitions and Lethality Command required specific 

functionality to ship, receive, inventory, and perform stock movements 

for ammunition. To accomplish these tasks, the Joint Munitions and 

Lethality Command required the development of an interface between 

LMP and a system commonly referred to as SmartChain.10 We found 

 

9

GAO-11-139. 

10SmartChain is a software application that interfaces with LMP to provide an electronic 

method for performing standard depot operations such as receiving, moving, inventorying, 

and shipping ammunition. It tracks, automates, and integrates depot operations to 

manage and update inventory records. 
 

Page 8 GAO-14-51 Defense Logistics

during our current review that the interface between LMP and 

SmartChain has been established, and officials stated that LMP and 

SmartChain provide the capability needed to perform these tasks.11

• The Tank-automotive and Armaments Command required specific 

functionality at its arsenals to automatically report data for items it 

manufactures. When Rock Island Arsenal and Watervliet Arsenal 

switched from their legacy system to LMP, they lost this capability 

because LMP does not include a manufacturing and execution system 

that provides this capability. We found during our current review that 

Rock Island Arsenal has since developed its own software tools and 

manual processes to provide similar functionality. Specifically, Rock 

Island Arsenal uses three legacy systems, which together cost 

approximately $300,000 per year to operate. Arsenal officials told us 

that they developed an additional system to report manufacturing data 

and track the status of items being manufactured—at a cost of about 

$400,000. They hired additional personnel to manage these systems, 

which includes manually entering data into LMP. According to 

documents provided by Rock Island officials, annual costs for these 

systems and personnel will average $3.6 million from fiscal years 

2013 through 2016. Arsenal and AMC officials stated that they expect 

Increment 2 to replace systems they are currently using to manage 

their shop floor operations. (We did not visit Watervliet Arsenal for this 

review).

Officials at AMC sites we visited stated that over time they are improving 

in their ability to use LMP, and some locations have developed tools and 

processes to better extract and analyze LMP data, or to fill in gaps in 

existing LMP functionality. In addition to the manufacturing tracking tools 

and processes developed at Rock Island Arsenal, as discussed above, 

we found the following examples:

• Red River Army Depot officials created a tool that enables users to 

generate customizable reports based on data extracted from LMP. 

Officials said they use these reports to brief depot leadership on areas 

such as schedule performance and inventory. Tobyhanna Army Depot 

created a tool using Microsoft Excel that extracts data from LMP and 

develops visual reports—in graphs and charts—to analyze depot 

 

11We have ongoing work looking at visibility that LMP and other information systems 

provide over the conventional ammunition inventory.
 

Page 9 GAO-14-51 Defense Logistics

workload and perform capacity planning. According to Tobyhanna 

officials, these reports allow them to manage depot operations by, for 

example, determining whether workload schedules need to be 

adjusted or personnel reassigned to higher priority tasks.12

• Corpus Christi Army Depot, using a combination of legacy systems, 

manual processes, and a locally-developed software tool, gained, 

among other things, the ability to automatically track the progress of 

work on the shop floor and record employee’s labor charges. Depot 

officials stated that the use of this tool, in conjunction with LMP, has 

provided them with detailed data that helps them to better manage 

their operations and achieve efficiencies by improving depot 

processes, such as decreasing the cost to repair UH-60 helicopters 

(from $7.58 million per helicopter in fiscal year 2011 to $6.82 million 

per helicopter in fiscal year 2012) while increasing the quantity of UH60 helicopters they can repair (from 48 in fiscal year 2011 to 51 in 

fiscal year 2012).

The Army is continuing development of LMP because, as currently 

deployed, it does not provide all of the functionality the Army needs to 

meet certain critical requirements, according to Army officials. According 

to the Army’s business case for Increment 2, the new functionality the 

Army is developing as part of Increment 2 is intended to address critical 

requirements that have emerged since the initial development of LMP and 

that are not addressed by Increment 1. The business case stated that the 

current system does not support certain critical AMC requirements 

pertaining to shop floor automation, Army business transformation goals 

(for example, maintaining data on the maintenance status of equipment), 

and requirements outlined in DOD guidance (for example, requirements 

 

12The reports produced by Tobyhanna depict workforce and workload data in graphs 

similar to those created by the Army Workload and Performance System, which is a 

separate information system that receives data from other systems—primarily LMP—to 

produce management reports and decision support tools intended to assist AMC sites in 

linking their workload demands to their workforce requirements. For more information on 

this system, see GAO, Defense Logistics: Oversight and a Coordinated Strategy Needed 

to Implement the Army Workload and Performance System, GAO-11-566R (Washington, 

D.C.: Jul. 14, 2011). In addition, we have begun a new engagement that will compare the 

management support and reporting capabilities of the Army Workload and Performance 

System with those available through LMP.

Additional LMP 

Development Needed to 

Meet Certain Critical Army 

Requirements
 

Page 10 GAO-14-51 Defense Logistics

related to item unique identification13). Requirements for Increment 2 can 

be categorized into six components: (1) further integration with other 

Army and Defense Logistics Agency enterprise resource planning 

systems, (2) controlling and maintaining visibility over material managed 

by non-Army sources of supply, (3) additional capability to manage Army 

prepositioned stocks, (4) managing repair operations at Army 

installations, (5) expanded ammunition management capability, and (6) 

tracking repair and manufacturing operations on the shop floor. Table 2 

summarizes the six components and the time line for their deployment.

 

13Item unique identification refers to technology that allows DOD to assign a unique 

number to an individual item and then use that unique number to manage the item in a 

variety of logistics processes. For further information on the status of this technology in 

DOD, see GAO, Defense Logistics: Improvements Needed to Enhance DOD’s 

Management Approach and Implementation of Item Unique Identification Technology, 

GAO-12-482 (Washington, D.C.: May 3, 2012).
 

Page 11 GAO-14-51 Defense Logistics

Table 2: LMP Increment 2 Components and Deployment Timeline 

Component Business need to be addressed Expected Users Timeline

Enterprise Resource 

Planning System 

Integration 

Enhancing the interchange of data with other 

Army and Defense Logistics Agency enterprise 

resource planning systems.

Primarily a technical release; not 

deployed to specific sites; no 

new users.

December 2013 

through July 2014

Non-Army Managed Items Replacing the last instance of the legacy 

Commodity Command Standard System that 

supports Army-owned Non-Army Managed 

Items and improving overall inventory 

management.

Approximately 36 item managers 

at the Tank-automotive and 

Armaments Command.

August 2014 

through September 

2015

Army Prepositioned Stock Modernizing the manually intensive war 

reserves planning process, which is currently 

performed outside of LMP.

Approximately 100 users that 

manage Army Prepositioned 

Stock.

August 2014 

through September 

2015

National Maintenance 

Program 

Integrating the work loading and management 

processes of LMP Increment 1 with the system 

that will be used to execute below-depot 

maintenance at Army installations. 

Approximately 200 users at the 

AMC life cycle management 

commands who manage the 

national maintenance program.

May 2015 through 

September 2016

Extended Ammunition Improving AMC national-level ammunition 

management processes that currently require 

multiple systems, including LMP Increment 1, to 

receive, store, survey, and issue ammunition. 

The use of multiple systems causes timing 

issues, impacting real-time visibility and 

accountability of ammunition assets.

Approximately 1,500 users in the 

Joint Munitions and Lethality 

Command.

May 2015 through 

September 2016

Expanded Industrial Base Automating shop floor operations that currently 

may rely on paper, manual data collection, and 

complicated processes. Also fulfills a need to 

improve management of Army military 

equipment and a DOD requirement to 

implement item unique identification capability.

Approximately 12,200 users 

(8,700 new users) at the 17 

industrial base sites.

May 2015 through 

September 2016

Source: GAO summary of Army business case.

In addition to the critical requirements identified in the Army’s business 

case for Increment 2, the Army has stated that additional development is 

necessary because LMP, as currently deployed, will not enable the Army 

to generate auditable financial statements. The National Defense 

Authorization Act for Fiscal Year 2010 required the development of a plan 

to ensure that the financial statements of DOD are validated as ready for 

audit not later than the end of fiscal year 2017.14 LMP product office and 

AMC officials told us that the Army cannot meet this requirement with the 

functionality currently provided by Increment 1, and the Army’s fiscal year 

2013 and 2014 working capital fund budget documents state that 

 

14Pub. L. No. 111-84, § 1003 (2009).
 

Page 12 GAO-14-51 Defense Logistics

although LMP is functional at AMC’s life cycle management commands, it 

requires the enhancements and upgrades of Increment 2 to generate 

auditable financial statements. In general, DOD considers the successful 

implementation of enterprise resource planning systems—which include 

LMP—critical to addressing long-standing weaknesses in financial and 

supply chain management, and DOD officials have stated that these 

systems are critical to ensuring that the department meets its requirement 

to have auditable consolidated financial statements.15

According to Army officials, a key LMP improvement in Increment 2 that 

supports audit readiness is the addition of the shop floor automation tool 

(part of the Enhanced Industrial Base component listed in table 2). The 

tool provides a standardized approach for managing shop floor operations 

across AMC’s depots and arsenals. This tool, according to Army officials, 

will provide the capability to track the labor and material expenses to 

specific work tasks and customers, which is a more detailed reporting 

capability than what is currently provided by Increment 1. Army officials 

acknowledged that some locations such as Corpus Christi Army Depot 

have developed local tools to manage shop floor operations but asserted 

that such tools cannot support the Army’s achievement of audit 

readiness. They stated that a significant investment of funds would be 

needed to make locally developed tools auditable, and that doing so 

would not be economically feasible.

In addition, according to Army officials, it would not be possible to gain all 

of the capabilities to be delivered with Increment 2 simply by upgrading 

legacy systems and modifying processes. For example, the Army is 

currently continuing to use one of the legacy systems that LMP was 

intended to replace—the Commodity Command Standard System—to 

control and maintain visibility over material managed by non-Army 

 

15For a discussion of the role of enterprise resource planning systems in achieving 

financial audit readiness, see GAO, DOD Financial Management: Reported Status of 

Department of Defense’s Enterprise Resource Planning Systems, GAO-12-565R

(Washington, D.C.: Mar. 30, 2012).
 

Page 13 GAO-14-51 Defense Logistics

sources of supply.16 According to officials from the LMP product office and 

AMC, this legacy system cannot currently support the Army’s need for 

auditable financial statements by fiscal year 2017 and thus needs to be 

replaced. By implementing this component of Increment 2, the Army 

expects to fully eliminate its need for the Commodity Command Standard 

System. Another example is related to item unique identification. 

According to DOD, financial management information necessary for the 

management of the department’s mission critical assets is also required 

to support future financial statement audits.17 This financial management 

information includes item unique identification, which cannot be 

accomplished using existing systems or through a completely manual 

process because, according to Army officials, some unique item 

identifiers are not human-readable. Instead, Army officials stated that 

AMC requires an electronic scanner that is planned to be included in the 

deployment of Increment 2. As a further justification for expanding LMP, 

the Army estimates that Increment 2 will cost $730 million through fiscal 

year 2026 but achieve approximately $1.4 billion in financial benefits.18

Table 3 shows the financial benefits that the Army has projected for 

Increment 2.

 

16According to the Army’s business case for LMP Increment 2, some inventory is owned 

by the Army yet managed by another organization, such as the Defense Logistics Agency. 

Because the Army does not manage this inventory, LMP is unable to search or reallocate 

this inventory to support other operations. Army documents also state that these 

processes were added to the Commodity Command Standard System after the initiation 

of LMP and that AMC decided in 2005 that this functionality would not be included in the 

initial deployment phases of LMP for reasons including time line and cost concerns.

17Office of the Under Secretary of Defense (Comptroller) and Chief Financial Officer, 

Financial Improvement and Audit Readiness Guidance (Washington, D.C.: Mar. 2013).

18We have included the projected benefits that are reported in the economic analysis that 

accompanies the Army’s business case for LMP Increment 2 to demonstrate the 

magnitude of the financial benefits the Army expects to realize as a result of deploying 

Increment 2. We did not assess the business case’s methodology or independently verify 

the reliability of the business case’s results.
 

Page 14 GAO-14-51 Defense Logistics

Table 3: Projected Financial Benefits from LMP Increment 2

Dollars in millions

Area of financial benefits FY14 FY15 FY16 FY17 FY18 - FY26 Total

Reduced contractor support - - - 20.1 523 543.2

Overtime reduction - - - 7.0 182.2 189.2

Legacy information technology - 2.0 9.6 16.4 156.0 183.9

National Maintenance Program - - 8.7 17.4 156.5 182.6

Legacy operations - - 4.7 11.8 89.5 106.1

Industrial operations personnel reduction - - - 3.3 86.7 90.0

Item unique identification - 5.5 5.5 5.5 49.9 66.5

Non-Army managed item inventory reduction - 1.6 1.6 1.6 - 4.7

Total - 9.1 30.1 83.2 1,243.7 1,366.1

Source: Army’s LMP Increment 2 economic analysis. 

Note: Total numbers may not add up, due to rounding.

The financial benefits shown in table 3 include both anticipated cost 

savings and cost avoidance. The Army is anticipating cost savings 

totaling approximately $1.1 billion from reduced contractor support, 

overtime, legacy information technology, legacy operations, and AMC 

industrial operations personnel. According to officials from the LMP 

product office and AMC, cost savings will be realized as reductions to the 

Army’s planned budgets starting in fiscal year 2017. Officials cited an 

AMC memo which states that approximately $30 million of the cost 

savings from reduced contractor support, overtime, and AMC industrial 

operations personnel should be realized in fiscal year 2017; $60 million 

should be realized in fiscal year 2018; and $90 million should be realized 

in fiscal year 2019 and annually thereafter for the life of LMP.19 According 

to the officials, the memo is referring to reductions in planned Army 

budgets in the specified fiscal years.20 The approximately $250 million in 

remaining financial benefits expected from Increment 2 includes cost 

 

19AMC, Army Materiel Command (AMC) Logistics Modernization Program (LMP) 

Increment 2 Productivity Improvements, Jun. 7, 2013.

20The memo states that the reductions will be time-phased to accommodate the expected 

learning curve before the productivity improvements are realized following the deployment 

of Increment 2. Additionally, the memo states that AMC industrial personnel will be 

reduced by attrition across the AMC industrial locations through the normal Army working 

capital fund rate-setting and workload management process. 
 

Page 15 GAO-14-51 Defense Logistics

avoidances from implementing the National Maintenance Program 

component of Increment 2, providing automatic item unique identification 

recording capability that will eliminate the need to manually perform those 

tasks, and reducing excess non-Army managed item inventory.

The use of LMP has provided the Army some benefits, but whether the 

system has delivered the expected financial benefits to date is unknown 

because AMC does not have a process to track these benefits. Since its 

deployment, LMP has provided some benefits to the Army. For example, 

because LMP relies on accurate data to perform effectively and 

efficiently, the Army has made data accuracy a priority. The Army has 

made progress in improving the accuracy of its data by conducting data 

assessments, correcting data problems, and placing management 

emphasis on data accuracy. Additionally, the use of LMP has improved 

accountability for inventory stored at AMC depots and has increased 

visibility over Army assets. However, the full extent of the financial 

benefits realized from LMP—which the Army projected would be over 

$750 million by the end of fiscal year 2012—is unknown because the 

Army has not tracked the benefits. Federal guidelines and standards 

outline the need for assessing whether expected benefits from an 

investment are achieved.21 To support the development of Increment 2, 

the Army is developing a performance baseline for sites that will initially 

deploy Increment 2. Without a process in place to identify and document 

financial benefits linked to LMP-driven performance improvements, the 

Army will be unable to track whether it is achieving the expected financial 

benefits from its sizeable investment.

Since its deployment, LMP has provided the Army some benefits. During 

our prior reviews of LMP before the final deployment phase had occurred, 

we reported that sites using LMP stated it was an improvement over 

legacy systems, because it increased visibility over assets and provided a 

 

21See OMB, Circular A-94: Guidelines and Discount Rates for Benefit-Cost Analysis of 

Federal Programs, Oct. 29, 1992; OMB, Capital Programming Guide: Supplement to 

Office of Management and Budget Circular A-11, Planning, Budgeting, and Acquisition of 

Capital Assets, Jul. 2013; GAO, Information Technology investment Management: A 

Framework for Assessing and Improving Process Maturity, GAO-04-394G (Washington, 

D.C.: Mar. 2004); and GAO, Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: Nov. 1, 1999).

LMP Has Provided 

Some Benefits to the 

Army, but the Extent 

of Financial Benefits 

to Date Is Unknown

LMP Has Provided Some 

Benefits to the Army
 

Page 16 GAO-14-51 Defense Logistics

single source of data for decision making.22 During our visits to AMC 

headquarters and the 14 AMC sites for the current review, officials 

provided examples of various benefits resulting from using LMP, such as 

increased visibility over inventory and maintenance operations.

We also found that, since our prior reviews, AMC has made progress in 

improving the accuracy of LMP data that it uses to support industrial 

operations by conducting data assessments, correcting data problems, 

and placing management emphasis on data accuracy. Data accuracy is 

necessary in order for enterprise resource planning systems such as LMP 

to perform effectively and efficiently. For example, to support repairs of 

vehicles, LMP contains data that identify the number of vehicles 

scheduled for repair at a depot, the number of parts needed to support 

these repairs, and the capacity of the depot to perform the repairs. Based 

on these data, LMP will recommend to item managers that they purchase 

a specific quantity of spare parts by a certain date in order to support the 

scheduled repairs. In order for these recommendations to be correct, the 

data they are based on must be accurate. If the data on which they are 

based are not accurate, item managers may purchase either too many or 

too few spare parts, or the purchases may not be made in time to support 

the scheduled repair—which could lead to repairs not being completed 

according to the planned schedule. According to the AMC Data Integrity 

Strategy, a data accuracy rate of 95 percent or greater—depending on 

the type of data—is consistent with the industry standard.

The Army has instituted several processes to enhance data accuracy. A 

key effort involves periodic assessments at AMC sites to evaluate the 

accuracy of LMP data. AMC has determined that these assessments, 

which are conducted by its Logistics Support Activity, should focus on 29 

critical data objects—groupings of data based on function—such as bills 

of material, purchase orders, or a sequence of repair activities. Between 

August 2010 and November 2012, the Logistics Support Activity 

performed 361 assessments across AMC that covered 18 of the 29 

critical data objects. The results of these assessments are documented in 

reports, and the root causes of any problems are identified for correction. 

Logistics Support Activity officials stated that their goal is to focus 

attention on these root causes so that data problems do not continue to 

occur. They will then perform a follow-up assessment, if it is deemed 

 

22GAO-11-139 and GAO-10-461. 
 

Page 17 GAO-14-51 Defense Logistics

necessary, to assess whether data accuracy has improved. For example, 

in August 2011, the Logistics Support Activity conducted a review of bills 

of material at various sites across AMC and assessed the accuracy of 

AMC’s bills of material at 51 percent—well below their 95-percent 

standard. In a follow-up review conducted in May 2012, the Logistics 

Support Activity assessed the overall accuracy of AMC’s bills of material 

at 92 percent. Furthermore, officials from the Logistics Support Activity 

stated that follow-up assessments at individual AMC sites have revealed 

improvements in data accuracy. For example, an initial assessment of 

work center data at the Letterkenny Munitions Center showed data 

accuracy to be 27 percent, while the follow-up assessment showed data 

accuracy to be 100 percent. Officials estimated that sites meet the 95-

percent standard during initial data assessments only half of the time, but 

in follow-up assessments they meet the standard about 90 percent of the 

time.

AMC sites we visited are also performing their own internal reviews of 

LMP data accuracy. For example, Letterkenny Army Depot has a data 

quality team that has conducted a number of internal assessments. One 

of these assessments, conducted in October 2012 on the bill of material 

for a TOW missile, found that multiple materials were listed on the bill of 

material as required but had no or very limited consumption. Depot 

officials told us that, based on these types of assessments, the depot 

intends to make changes to its data to more accurately reflect usage of 

materials during repairs. Similarly, in order to assess and improve the 

data in LMP, officials at Anniston Army Depot mapped out the entire endto-end repair process for the M9 Armored Combat Earthmover, which 

enabled them to identify data errors in LMP that they corrected. Officials 

at Red River Army Depot told us that they prepare weekly reports for 

depot management, and that data accuracy is discussed during meetings 

held by the depot commander. Officials also stated that they are 

emphasizing the importance of maintaining accurate LMP data and are 

holding users accountable for their management of LMP data. For 

example, officials at all five Army depots stated that LMP users and their 

supervisors are expected to ensure that the data they manage are 

accurate.

The use of LMP has also increased visibility over inventory. AMC officials 

stated that LMP provides the capability to automatically calculate the 

parts needed to conduct a repair at a depot. If the depot does not have 

these parts, LMP recommends that the needed parts be purchased from 

some other source of supply. In order for this process to work effectively, 

all inventory at the depot should be recorded in LMP so the system does 
 

Page 18 GAO-14-51 Defense Logistics

not recommend ordering parts the depot already has. Officials at AMC 

sites we visited told us that prior to LMP, parts might be purchased by the 

Army and stored at the depot but not necessarily recorded in the legacy 

systems. Accordingly, item managers could make unnecessary 

purchases of inventory items that were available but not visible within the 

legacy systems. AMC stated that, due to the inventory reviews following 

the deployment of LMP and corrections made to inventory records, it 

entered more than $200 million worth of inventory into LMP that had 

already been purchased by the Army and was physically located at the 

depots but was not recorded in the legacy systems. Accordingly, AMC 

officials expect that officially tracking inventory that had already been 

purchased could result in a cost avoidance in the future. Similarly, 

Aviation and Missile Command officials stated that the better visibility of 

inventory in LMP enabled them to identify excess inventory that was on 

hand, which resulted in a cost avoidance of $1.2 million due to reduced 

inventory storage costs.23

The use of a single source of data provided by LMP, according to AMC 

officials, has resulted in other efficiencies. For example, officials at the 

AMC War Reserve Division stated that they are now able to provide near 

real-time updates to address questions on the status of war reserves to 

Army headquarters. These officials stated that, prior to LMP, the process 

to answer questions from Army headquarters would require 3 weeks to 

collect and analyze data from the life cycle commands; now, the process 

can be completed by extracting a report from LMP in minutes. 

Additionally, AMC officials stated that the single source of data has 

reduced the number of meetings that need to be held. For example, AMC 

officials who manage secondary inventory items stated that they are able 

to track the status of obligations across each of the life cycle 

management commands by extracting a consolidated report directly from 

LMP. The officials stated that, prior to LMP, they would hold bi-weekly 

meetings with the life cycle commands to capture the same information. 

Additionally, officials at Red River Army Depot stated that LMP provides 

visibility of inventory at all AMC locations, which has enhanced their 

ability to redistribute parts to support production needs. These officials 

stated that, prior to LMP, they had to call other depots to see if additional 

 

23Aviation and Missile Life Cycle Management Command officials stated that the cost 

avoidance due to inventory storage costs was a result of disposing of $3 billion of 

inventory on hand that had already been purchased. We did not independently verify 

these estimates.
 

Page 19 GAO-14-51 Defense Logistics

parts were available; with LMP, they are able to quickly identify which 

locations have the additional parts.

Finally, AMC officials stated that LMP has enabled them to develop and 

begin to implement a set of standardized, enterprise-wide performance 

measures to better assess the business operations of AMC sites. They 

told us that the measures previously used to assess AMC performance 

were inadequate, in part because they were not standardized. For 

example, officials stated that there was no standard measure for the rate 

of inventory turnover—which measures the number of times an inventory 

item is used and replaced during a given period—but that AMC was 

working on developing such a measure. At the time of our review, the 

standardized performance measures that AMC had developed included 

one for inventory turnover, as well as others for depot schedule 

performance, depot cost performance, forecast accuracy, supplier 

delivery performance, and direct versus indirect labor hours. According to 

documents provided by AMC, these measures were being used during 

regularly-held meetings with AMC headquarters beginning in June 2013.

The extent to which expected financial benefits have been realized to 

date from deploying LMP is unknown, because AMC does not yet have a 

process to track these benefits. Without a process in place to track 

financial benefits associated with LMP, the Army does not have a way to 

determine whether LMP’s projected financial benefits are materializing. 

The Army expected significant financial benefits from the deployment of 

LMP Increment 1 across AMC, which was completed in October 2010. 

According to a 2009 study prepared by the Army to support the fiscal year 

2010 Investment Review Board certification of LMP, the system was 

expected to lead to over $750 million in financial benefits by fiscal year 

2012 and eventually achieve more than two dollars in benefits for every 

dollar spent.24 In its fiscal year 2014 budget documents, the Army 

projected that LMP would provide an estimated net financial benefit of 

nearly $1.3 billion through 2020. The Army expected these financial 

benefits to be achieved largely by LMP-driven improvements to the 

 

24We have included the results of the Army’s 2009 study to demonstrate the magnitude of 

the financial benefits the Army expected to realize as a result of deploying LMP. We did 

not assess the study’s methodology or independently verify the reliability of the study’s 

results.

Extent of Financial 

Benefits to Date from 

Deploying LMP Is 

Unknown 
 

Page 20 GAO-14-51 Defense Logistics

performance of AMC operations through, for example, reducing inventory, 

improving productivity, and reducing costs for legacy systems.

Federal guidelines and standards outline the need for assessing whether 

expected benefits from an investment are achieved. According to the 

Office of Management and Budget’s Circular A-94, which provides 

general guidance for benefit-cost analysis of federal programs, an 

element of benefit-cost analysis is verification of expected benefits.25 The 

circular states that retrospective studies to determine whether anticipated 

benefits and costs have been realized are potentially valuable. Such 

studies can be used to determine necessary corrections in existing 

programs and to improve future estimates of benefits and costs in these 

programs or related ones. Agencies should have a plan for periodic, 

results-oriented evaluation of program effectiveness. They should also 

discuss the results of relevant evaluation studies when proposing 

reauthorizations or increased program funding. The Office of 

Management and Budget’s Capital Programming Guide also states that a 

post-implementation review of an information technology project should 

evaluate an investment’s efficiency and effectiveness to determine how 

well the investment achieved the planned functionality and anticipated 

benefits.26 Additionally, GAO’s Information Technology Investment 

Management framework states that a critical process for building a 

foundation for information technology investment success is providing 

investment oversight.27 The purpose of this critical process is to ensure 

that the relevant organization provides effective oversight for its 

information technology projects throughout all phases of their life cycles. 

Such oversight should include observing the project’s progress toward 

expected cost, schedule, and benefits. Furthermore, federal internal 

control standards state that managers should compare actual 

performance to planned or expected results throughout the organization 

and analyze significant differences.28

 

25Circular A-94: Guidelines and Discount Rates for Benefit-Cost Analysis of Federal 

Programs. 

26Capital Programming Guide: Supplement to Office of Management and Budget Circular 

A-11, Planning, Budgeting, and Acquisition of Capital Assets. 

27GAO-04-394G. 

28GAO/AIMD-00-21.3.1.
 

Page 21 GAO-14-51 Defense Logistics

However, the extent to which the Army has realized the expected 

financial benefits from LMP is unknown because AMC does not yet have 

a process to identify and document financial benefits realized as a result 

of performance improvements gained through the use of LMP. We asked 

AMC headquarters officials for information on the total financial benefits 

achieved from using LMP, but they were unable to provide such 

information because they could not quantify the impact LMP had on 

inventory value or provide measurements of improved productivity. 

Officials did not provide an explanation for why they did not have a 

process to track financial benefits, but they stated that the inability to 

quantify financial benefits from LMP-driven performance improvements 

was due in part to the fluctuations in AMC workload resulting from 

operations in Iraq and Afghanistan. Additionally, most AMC sites we 

visited reported that LMP had not led to financial benefits that they could 

quantify. Specifically, officials at 12 of the 14 sites we visited stated that 

LMP either had not resulted in any quantifiable financial benefits or that 

they could not provide us with any documentation that quantified the 

financial benefits.

The LMP product office and two AMC sites reported financial benefits 

from LMP. According to the LMP product office, an estimated $114 million 

of financial benefits were attributed to legacy system costs that were 

avoided through fiscal year 2012 as a result of LMP deployment. 

Additionally, in March 2013, the Aviation and Missile Command reported 

a $1.2 million cost avoidance due to reduced storage costs from the 

disposal of excess inventory. Finally, as noted earlier in this report, 

Corpus Christi Army Depot reported that use of LMP, in conjunction with 

a locally-developed software tool and manual processes, enabled it to 

improve depot processes and decrease the costs to repair UH-60 

helicopters by approximately $760,000 per helicopter. Because 51 UH-60 

helicopters were repaired in fiscal year 2012, AMC officials estimated a 

total cost savings of approximately $39 million.

LMP product office and AMC officials told us that there was not an 

accurate process currently in place to track financial benefits associated 

with LMP-driven performance improvements. Further, the officials stated 

that retroactively producing an accurate assessment of benefits realized 

to date from LMP would be difficult, because the Army had not 

established a baseline for performance prior to the implementation of 

LMP against which LMP-driven improvements could then be measured. 

The officials added that the Army has learned this lesson and has 

incorporated operational performance metrics in its plans for Increment 2. 

(These operational metrics are separate from the enterprise-wide 
 

Page 22 GAO-14-51 Defense Logistics

performance measures discussed earlier in this report that AMC began to 

use in June 2013.) Specifically, the Army is in the process of developing 

an initial operational performance baseline for sites that will pilot 

Increment 2. According to documents provided by the LMP product office, 

these operational metrics include assessing the time needed to repair a 

weapon system or component; the direct labor charges needed to support 

production at industrial activities; program support overtime (i.e., the 

amount of overtime for indirect labor—such as schedulers, planners, and 

resource managers); data entry lag time; tracking the labor and materials 

expended for rework operations; and inventory visibility managed outside 

of LMP. Officials from the LMP product office and AMC stated that the 

process to baseline performance against these metrics is ongoing and 

primarily focused on the Increment 2 pilot sites, with the intention of 

assessing performance across all of AMC before the next milestone 

decision for Increment 2 in May 2015. Because the baseline is still under 

development, the degree to which these operational metrics will enable 

the Army to demonstrate financial benefits from deploying Increment 2 is 

unknown.

Over the last decade, the Army has made progress using LMP to support 

its industrial operations, has improved data accuracy in LMP, and has 

realized benefits. However, because the Army has not established a 

process for tracking LMP’s financial benefits, it is not in a position to 

determine whether it is realizing a return on its sizeable investment in 

LMP. The Army plans to spend another $1.7 billion on operating the 

deployed components of LMP Increment 1 over the course of the 

system’s life cycle, in addition to spending another $730 million on 

Increment 2. Given the magnitude of the investment already committed 

and planned to be committed to LMP, oversight by decision makers in 

DOD and the Congress would likely improve with a better understanding 

of what financial benefits have been realized from deploying LMP to 

determine whether the Army’s goals for the system are being met and 

resources are being used effectively.

To determine whether the Army is achieving its estimated financial 

benefits in LMP, we recommend that the Secretary of Defense direct the 

Secretary of the Army to develop and implement a process to track the 

extent of financial benefits realized from the use of LMP during the 

remaining course of its life cycle. This process should be linked with the 

LMP performance baseline now being developed by the Army for use at 

AMC industrial sites.

Conclusions 

Recommendation for 

Executive Action
 

Page 23 GAO-14-51 Defense Logistics

We provided a draft of this report to DOD for comment. The Army 

provided written comments, which are reproduced in appendix II. The 

Army concurred with our recommendation and stated that it will develop a 

process to track the extent of financial benefits recognized within LMP, 

which will be linked to the LMP performance baseline. The Army also 

stated that it is initiating a series of workshops to establish an enduring 

process to capture the financial benefits realized from the use of LMP. 

These actions, when implemented, will meet the intent of the 

recommendation. In addition, the Army provided technical comments, 

which we have incorporated as appropriate.

We are sending copies of this report to appropriate congressional 

committees, the Secretary of Defense, and the Secretary of the Army. In 

addition, this report will be made available at no charge on the GAO 

website at http://www.gao.gov.

Should you or your staff have any questions concerning this report, 

please contact me at (202) 512-5257 or merrittz@gao.gov. Contact points 

for our Offices of Congressional Relations and Public Affairs may be 

found on the last page of this report. GAO staff who made key 

contributions to this report are listed in appendix III.

Zina D. Merritt

Director

Defense Capabilities and Management

Agency Comments 

and Our Evaluation
Appendix I: Scope and Methodology

Page 24 GAO-14-51 Defense Logistics

To assess the extent to which LMP supports AMC’s industrial operations, 

we met with officials at AMC headquarters responsible for overseeing 

LMP to discuss the system’s deployment and usage. We reviewed our 

prior work related to the deployment of LMP and followed up on issues 

that we had previously identified. We also obtained and reviewed 

pertinent documents, including reports submitted to AMC headquarters by 

the life cycle management commands and subordinate sites on the status 

of their industrial operations. We met with officials at 14 AMC sites—

including all five AMC life cycle management commands and all five AMC 

maintenance depots—where LMP is deployed. Specifically, we visited the 

following individual sites:

Life cycle management commands

• Army Sustainment Command, Rock Island, Illinois

• Aviation and Missile Command, Huntsville, Alabama

• Communications-Electronics Command, Aberdeen, Maryland

• Joint Munitions and Lethality Command, Rock Island, Illinois

• Tank-automotive and Armaments Command, Warren, Michigan

Maintenance depots

• Anniston Army Depot, Anniston, Alabama

• Corpus Christi Army Depot, Corpus Christi, Texas

• Letterkenny Army Depot, Chambersburg, Pennsylvania

• Red River Army Depot, Texarkana, Texas

• Tobyhanna Army Depot, Tobyhanna, Pennsylvania

Manufacturing arsenal

• Rock Island Arsenal (Joint Manufacturing and Technology Center), 

Rock Island, Illinois

Ammunition sites

• Anniston Defense Munitions Center, Anniston, Alabama

• Letterkenny Munitions Center, Chambersburg, Pennsylvania

• McAlester Army Ammunition Plant, McAlester, Oklahoma

We judgmentally selected Rock Island Arsenal to visit based on its 

proximity to the headquarters of Army Sustainment Command and the 

Joint Munitions and Lethality Command, McAlester Army Ammunition 

Plant based on the scope of its manufacturing and storage mission, and 

Anniston and Letterkenny Munitions Centers based on their proximity to 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology

Page 25 GAO-14-51 Defense Logistics

Army depots. During these site visits, we interviewed officials and 

obtained relevant documentation regarding the extent to which they used 

LMP to conduct their operations, were taking actions to improve the 

accuracy of the data used in LMP, and had realized nonfinancial and 

financial benefits from LMP.

We also obtained and analyzed Army documents, including the business 

case and an accompanying economic analysis, that were developed to 

support the Army’s proposal to move forward with the development and 

acquisition of Increment 2. We met with officials from AMC headquarters 

and the LMP product office to discuss their plans for Increment 2, and we 

also discussed the Army’s plans for Increment 2 with officials at individual 

AMC sites.

To determine the extent to which the Army has realized expected benefits 

from deploying the system, we obtained and reviewed Army 

documentation describing the expected benefits to be achieved from 

deploying LMP, including briefings describing the expected benefits and 

functionality of the system, a 2009 study supporting the fiscal year 2010 

Investment Review Board certification of LMP, Army budget documents, 

and evidence that AMC headquarters, the individual sites, and the LMP 

Product Office were able to provide regarding actual benefits, if any, 

achieved to date. We also met with officials at AMC’s Logistics Support 

Activity to discuss their efforts to improve the accuracy of data used in 

LMP, and we obtained and reviewed AMC’s strategy for LMP data 

accuracy as well as documentation on LMP data accuracy assessments 

performed by the Logistics Support Activity. To assess the reliability of 

LMP data, we reviewed related documentation on LMP data accuracy 

and interviewed officials knowledgeable about LMP data. We determined 

the data were sufficiently reliable for the purposes of our report.

We conducted this performance audit from August 2012 to November

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Comments from the Department 

of the Army

Page 26 GAO-14-51 Defense Logistics

Appendix II: Comments from the Department 

of the Army
Appendix II: Comments from the Department 

of the Army

Page 27 GAO-14-51 Defense Logistics
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 28 GAO-14-51 Defense Logistics

Zina D. Merritt, (202) 512-5257 or merrittz@gao.gov

In addition to the contact named above, Thomas Gosling (Assistant 

Director), Cynthia Grant, Joanne Landesman, Jim Melton, Geoffrey Peck, 

Amie Steele, and Michael Willems made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 
Related GAO Products

Page 29 GAO-14-51 Defense Logistics

DOD Financial Management: Reported Status of Department of 

Defense’s Enterprise Resource Planning Systems. GAO-12-565R. 

Washington, D.C.: March 30, 2012.

Defense Logistics: Oversight and a Coordinated Strategy Needed to 

Implement the Army Workload and Performance System. GAO-11-566R. 

Washington, D.C.: July 14, 2011.

Defense Logistics: Additional Oversight and Reporting for the Army 

Logistics Modernization Program Are Needed. GAO-11-139. Washington, 

D.C.: November 18, 2010.

DOD Business Transformation: Improved Management Oversight of 

Business System Modernization Efforts Needed. GAO-11-53. 

Washington, D.C.: October 7, 2010.

Defense Logistics: Actions Needed to Improve Implementation of the 

Army Logistics Modernization Program. GAO-10-461. Washington, D.C.: 

April 30, 2010.

Defense Logistics: Observations on Army’s Implementation of the 

Logistics Modernization Program. GAO-09-852R. Washington, D.C.: July 

8, 2009.

DOD Business Transformation: Lack of an Integrated Strategy Puts the 

Army’s Asset Visibility System Investments at Risk. GAO-07-860. 

Washington, D.C.: July 27, 2007.

Army Depot Maintenance: Ineffective Oversight of Depot Maintenance 

Operations and System Implementation Efforts. GAO-05-441. 

Washington, D.C.: June 30, 2005.

DOD Business Systems Modernization: Billions Continue to Be Invested 

with Inadequate Management Oversight and Accountability. GAO-04-615. 

Washington, D.C.: May 27, 2004.

DOD Competitive Sourcing: Plan Needed to Mitigate Risks in Army 

Logistics Modernization Program. GAO/NSIAD-00-19. Washington, D.C.: 

October 4, 1999.

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